The billionaire behind Pacific Health

The key figure behind failed hospital operator Pacific Health Corp. is a German business tycoon with a Business degree from Harvard University who appears on Forbes Magazine's list of the world's richest people. But Dr. Bernard Broermann has mostly flown under the radar in Southern California – until now.

The California company that Broermann founded owns four hospitals it can no longer afford to keep open. The looming closure of Newport Specialty Hospital in Tustin is disrupting the care of 32 long-term pediatric patients housed in the facility, most of whom have major disabilities due to injuries, illness or congenital conditions. Many are hooked up to feeding and breathing tubes.

Broermann, who is worth $2.1 billion according to Forbes' most recent tally, is slightly better known in Germany. He is the sole owner of the Asklepios Group, one of the country's top three private hospital operators, which posted $3.4 billion in annual revenue last year. He also owns a luxury spa and hotel in the mountains near Frankfurt, Germany's financial capital.

On its website, Asklepios – named for the Greek god of medicine – boasts that "at the centre of company activities is the constant development of our competencies, a high frequency of innovations, investments and solid financing potential."

The same cannot be said of Pacific Health, which Broermann created in 1984 and later left in the hands of local management that drove it into the ground – and into the grip of federal prosecutors.

After learning of the kids' plight in Tustin, Broermann stepped forward to give his version of events. In an email he sent the Register on Tuesday, Broermann said "of course I will do everything I can to make sure that the pediatric unit at Tustin is maintained." He modified his statement in a second email Wednesday, in which he stated, "I will do everything I can – that is, everything my attorneys allow me without establishing personal liability – to maintain the pediatric services at Tustin, because ... it has to stay open."

The news that Newport Specialty will close, along with reports that critical supplies are lacking and caregivers are not being paid, has left state and county regulators scrambling to find facilities that can absorb the children in the hospital.

While vowing to help, Broermann seems eager to avoid responsibility for the problems of the California hospital group he started. He said that he is no longer the owner of Pacific Health, because in 1992 he handed over 100 percent of the shares in its parent company, Health Investment Corp., to a nonprofit foundation in Germany. He declined to name the foundation, saying that "to have their name in the media helps nobody and can only hurt."

There is a nonprofit organization in Konigstein, Germany, called the Dr. Broermann Foundation, which lists him as chairman. The Register was unable to ascertain whether it is the foundation that owns Pacific Health. Broermann said the name of the owner is "of course registered in the books of the corporation," adding that Pacific Health's counsel, Sharyn Alcaraz, could confirm that. Alcaraz did not return calls seeking comment.

Because Pacific Health is privately held, it is not required to identify its owners.

Though he handed the shares over to the nonprofit in 1992, Broermann continued to play an active role in Pacific Health for many years afterward, based on his own account. In his Tuesday email, he said that after a large acquisition in Hamburg in 2005, "I no longer had the time to look after PHC." He named James Young as president and CEO of Pacific Health, with whom he "thought it was in good hands."

It was on Young's watch that Pacific Health engaged in a scheme to recruit homeless people to three of its hospitals – including Anaheim General and Newport Specialty, known at the time as Tustin Hospital and Medical Center – to undergo unnecessary medical procedures for bogus diagnoses, all of which were billed to Medicare and Medi-Cal.

Last year, the company admitted to the fraudulent operation and agreed to a $16.5 million settlement with federal prosecutors. Young was never charged in connection with it. A doctor with admitting privileges at the Tustin hospital was sentenced to a year and a day in federal prison and Los Angeles Doctors Hospital Inc., a Pacific Health subsidiary, pleaded guilty to paying kickbacks to the recruiters. Pacific Health admitted responsibility, according to court documents.

Broermann says he only became aware of the situation in 2008, after federal officials began investigating it. "I felt ashamed of what had happened and tried to help bring PHC back to order, primarily by bringing in a new management team and by helping to settle the case," he says.

Broermann concedes the scheme "should have never happened," but adds that "former management claims no criminal action was ever taken."

An Asklepios spokesman, Rudi Schmidt, said that neither Broermann nor the nonprofit that owns the Pacific Health shares "ever took any money out of the company." Despite his professed arms-length relationship with Pacific Health, Broermann said the foundation that owns it has "appointed me and another attorney to represent their interest, and we try to find the best solution for patients, employees and the communities the hospital served."